Udacity Reaches $1 Billion Valuation For Its Online 'Nanodegrees' With New $105 Million Raise

Sebastian Thrun has built a lot of high-tech inventions over his career, from prize-winning robots at Stanford to
Google Street View and the secretive Google[x] lab, where he helped get Google on the road to driverless cars (and the ill-fated Google Glass, a pair of which will be tied to Thrun forever in image search results). But since 2011, Thrun's mission has been to build an online startup that could help democratize education at a global scale.

Easier said than done—several startups have set similarly lofty goals in the past few years, promising to make high-quality education widely available through massive open online courses, known as MOOCs. But by partnering with many of the leading tech companies in the U.S. to create coursework and hire his graduates, Thrun's startup Udacity has struck a model that the CEO believes will not just solve how to get thousands of aspiring students to sign up, but will guide them all the way to a job. The students take courses to receive "nanodegrees," a term befitting Thrun's techie background and the nineteen tech companies including
Facebook and Google that contribute to its coursework. Nanodegree holders then typically get introductions and guidance to interview for jobs with similarly elite tech companies.

"Our students often come from backgrounds that would make them seem unqualified if you just looked at their CV," says Thrun. "We've had an elementary school assistant who became a software engineer; a professional golfer who became a data scientist. We help people who don't fit the existing molds shift careers."

That also applies to finding talent internationally. In addition to the more than 11,000 students who have used Udacity, the startup has created 8,000 scholarships to date, mostly in the U.S. but with also 1,000 each in Egypt, India and for Syrian refugees.

Udacity's business model appears to working, too: while the startup charges just $200 per month for its courses and then returns half of that when a student reaches completion, Udacity reached profitability earlier this year. "Is it feasible to educate students for just $100 per month? I would say that from our data, the answer is yes, with a very nice profit margin," says Thrun.

But having proved profitability, Udacity now plans to spend fast to ramp up its growth. Udacity announced Wednesday it had raised $105 million in a Series D funding round led by strategic investor Bertelsmann and including Baillie Gifford, Emerson Collective and Google Ventures, alongside existing investors Andreessen Horowitz, Charles River Ventures and Drive Capital. Post-money, the new funding values Udacity at $1 billion, making it the latest in a long line of startups to join the tech "unicorn" ranks.

Bertelsmann, whose CEO Kay Krafft has joined Udacity's board, will help the company ramp up its presence in Europe in upcoming months. (The company currently has offices in Shanghai and Bangalore, with a presence in Cairo as well.) Udacity will also look to greatly expand the nine nanodegree categories it offers today to around 45 or 50 within a year.

Given Thrun's background, it's no surprise Udacity works a lot with Google, which will fly out and host top finishers of its Android program next week. But to achieve the ambition Thrun has for the startup, Udacity may have to do more than just teach engineering and coding to students looking to get into tech. And it will need to keep completion rates high—currently 60%, compared to what the company says is 3-5% for MOOCs overall.

Thrun says Udacity still had about half the $58.1 million it had previously raised left in the bank. Asked whether the billion-dollar valuation, exactly (and seemingly deliberately) reached in the post-money valuation, was for symbolic or marketing purposes in attracting more partners and talent, Thrun scoffs. According to him, employees will go have a beer, then quickly move on as the internal processes Udacity used internally to get to this point will need retooling for another factor of scale.

"I get more excited when I get an email that someone just landed a job at Nest, or at Google," says Thrun. But there's still plenty of pride in that, just of a different source. "They'll look back many years later and hopefully they'll say, this all happened because of Udacity."

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